Transitional Provisions in Certain Cases under GST

Goods and Services Tax (GST) is a comprehensive indirect tax that replaces all other indirect taxes levied on goods and services by the Central and State governments in India. GST is applicable to all goods and services, except for certain exempted products and services. It is a destination-based tax system where the tax is levied at the final consumption point.

However, the introduction of GST has led to certain transitional issues that need to be addressed. The government has provided transitional provisions to facilitate a smooth transition from the old tax regime to the new GST regime. This article will discuss transitional provisions in certain cases under GST and VAT paid on goods lying with agents to be allowed as credit.

Transitional Provisions under GST

Transitional provisions under GST refer to the provisions that govern the transition of taxpayers from the old tax regime to the new GST regime. These provisions are aimed at ensuring that taxpayers are not burdened with any additional taxes or compliance obligations because of the transition to GST.

One of the key transitional provisions under GST is the Input Tax Credit (ITC) provision. Under this provision, taxpayers can claim credit for taxes paid on inputs and input services used in the production of goods or provision of services. This credit can be used to offset GST liability on outward supplies.

Another important transitional provision under GST is the provision for the carry-forward of unutilized input tax credit (ITC) from the old tax regime to the new GST regime. Taxpayers can carry forward the unutilized ITC on the closing balance of their GST returns filed under the old tax regime. This will help taxpayers to reduce their GST liability in the new regime.

VAT Paid on Goods Lying with Agents

Under the old tax regime, it was common for businesses to store goods with agents or consignment agents for sale. In such cases, the goods were owned by the principal, but the agent would hold the goods and sell them on behalf of the principal. The VAT paid on these goods was not allowed as credit to the principal unless the goods were sold by the agent and the VAT was paid by the agent.

However, under GST, the government has allowed VAT paid on goods lying with agents to be allowed as credit to the principal. This is provided that the following conditions are met:

The goods were lying with the agent on the appointed day (the day on which GST was implemented).
The VAT invoice or any other document evidencing payment of VAT was issued not earlier than 12 months before the appointed day.
The recipient (principal) has declared the stock of such goods in the prescribed form.
The supplier (agent) has either refunded the VAT to the recipient (principal) or has reduced the price charged to the recipient (principal) by the amount of the VAT.

Once these conditions are met, the VAT paid on goods lying with agents can be claimed as credit by the recipient (principal) in their GST returns.

Conclusion

The transitional provisions under GST are aimed at ensuring a smooth transition to the new GST regime. The Input Tax Credit provision and the provision for the carry-forward of unutilized input tax credit are important transitional provisions that will help taxpayers to reduce their GST liability in the new regime.

The provision allowing VAT paid on goods lying with agents to be claimed as credit is a welcome move and will benefit businesses that store goods with agents or consignment agents for sale.

Overall, it is important for taxpayers to understand the transitional provisions under GST and to comply with them to avoid any compliance issues or additional taxes.